Asset Purchase Agreement - InterCept Group Inc., InterCept Output Solutions LP, HSI Holdings Inc., Superior Forms Ltd., HSI Properties Ltd., Holmes & Shaw Ltd. Inc., Holmes & Shaw General Inc., George V. Shaw III and Vincent Investment Co. Inc.
ASSET PURCHASE AGREEMENT
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among
THE INTERCEPT GROUP, INC.,
a corporation formed under the laws of the State of Georgia
and
INTERCEPT OUTPUT SOLUTIONS, LP,
a limited partnership formed under the laws of the State of Texas
and
HSI HOLDINGS, INC.
a corporation formed under the laws of the State of Nevada
and
SUPERIOR FORMS, LTD.
a limited partnership formed under the laws of the State of Texas
and
HSI PROPERTIES, LTD.
a limited partnership formed under the laws of the State of Texas
and
HOLMES & SHAW LIMITED, INC.
a corporation formed under the laws of the State of Nevada
and
HOLMES & SHAW GENERAL, INC.
a corporation formed under the laws of the State of Nevada
and
GEORGE V. SHAW, III
a individual residing in the State of Texas
and
VINCENT INVESTMENT COMPANY, INC.
a corporation formed under the laws of the State of Texas
October 1, 2001
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TABLE OF CONTENTS
Page
ARTICLE 1 - SALE AND PURCHASE ............................................. 1
1.1 Included Assets ................................................ 1
1.2 Intent of the Parties .......................................... 4
1.3 Title to and Transfer of Assets ................................ 4
1.4 Excluded Assets ................................................ 4
ARTICLE 2 - ASSUMPTION OF LIABILITIES BY THE PURCHASER .................... 5
2.1 Assumed Liabilities ............................................ 5
2.2 Liabilities Not Assumed ........................................ 5
ARTICLE 3 - CLOSING AND PURCHASE PRICE .................................... 8
3.1 Closing ........................................................ 8
3.2 Purchase Price ................................................. 8
3.3 Fair Market Value of Assets .................................... 8
3.4 Establishment of Escrow ........................................ 8
ARTICLE 4 - REPRESENTATIONS AND WARRANTIES OF THE SELLER PARTIES ......... 8
4.1 Entity Existence ............................................... 8
4.2 Partnership Power; Authorization; Enforceable Obligations ...... 9
4.3 No Conflict .................................................... 9
4.4 Required Government Consents ................................... 9
4.5 Five Largest Customers ......................................... 10
4.6 Financial Matters .............................................. 10
4.7 Absence of Changes ............................................. 10
4.8 No Undisclosed Liabilities ..................................... 12
4.9 Title to Property .............................................. 12
4.10 Condition of Property .......................................... 12
4.11 Inventory ...................................................... 12
4.12 Contracts - General ............................................ 12
4.13 Intellectual Property .......................................... 13
4.14 Leases ......................................................... 13
4.15 Litigation ..................................................... 13
4.16 Court Orders, Decrees, and Laws ................................ 14
4.16.1 Compliance with Laws .................................... 14
4.16.2 Adequacy of Authorizations .............................. 14
4.16.3 Environmental Matters ................................... 14
4.17 Personnel and Compensation ..................................... 14
4.17.1 List of Personnel ....................................... 14
4.17.2 Employee Relations ...................................... 14
4.17.3 Compliance with Immigration and Labor and Employment
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Laws .................................................... 15
4.19 Employee Benefit Plans and Arrangements ........................ 15
4.18.1 List of Plans and Obligations ........................... 15
4.18.2 Compliance .............................................. 15
4.18.3 No Liabilities or Obligations ........................... 15
4.18.4 No Payments ............................................. 15
4.18.5 No Multi-Employer Plans ................................. 16
4.19 Insurance Policies ............................................. 16
4.20 Broker's or Finder's Fees ...................................... 16
4.21 Accounts Receivable ............................................ 16
4.22 Vehicles ....................................................... 16
4.23 No Guarantees .................................................. 16
4.24 Tax Matters .................................................... 17
4.24.1 Tax and Social Returns .................................. 17
4.24.2 Inquiries, Investigations, and Audits ................... 17
4.24.3 Returns Furnished ....................................... 17
4.25 Disclosure ..................................................... 17
ARTICLE 5 - REPRESENTATIONS AND WARRANTIES OF PURCHASER AND PARENT ........ 18
5.1 Corporate Existence ............................................ 18
5.2 Corporate and Partnership Power and Authorization .............. 18
5.3 No Conflict. ................................................... 18
5.4 Broker's or Finder's Fees ...................................... 19
5.5 Outstanding Stock .............................................. 19
5.6 Financing ...................................................... 19
ARTICLE 6 - CONDITIONS TO CLOSING ......................................... 19
6.1 Conditions to the Sellers' Obligations ......................... 19
6.2 Conditions to the Obligations of the Purchaser and the Parent .. 20
ARTICLE 7 - CLOSING ....................................................... 22
7.1 Actions at Closing ............................................. 22
7.1.1 Copies of Consents ...................................... 22
7.1.2 Deliveries of Documents ................................. 22
7.2 Delivery of Purchase Price ..................................... 22
ARTICLE 8 - COVENANTS OF THE PURCHASER, THE PARENT, AND THE SELLERS ....... 22
8.1 Mutual Cooperation ............................................. 22
8.2 Covenants of the Sellers Regarding the Operation of the
Business from the Signing Date to the Closing Date ........... 23
8.3 Post-Closing Settlement ........................................ 24
8.4 Allocation of Purchase Price ................................... 25
8.5 Maintenance of Books and Records ............................... 25
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8.6 UCC Matters .................................................... 25
8.7 Offers of Employment by the Parent to the Sellers' Employees ... 25
8.8 Enrollment in Parent's Health Plan ............................. 26
8.9 Assumption by Parent of Sellers' Health Plan ................... 26
8.10 Termination of Holmes & Shaw, Inc. 401(k) Plan ................. 26
8.12 Consents........................................................ 26
ARTICLE 9 - INDEMNIFICATION ............................................... 27
9.1 Indemnification by the Seller Parties .......................... 27
9.1.1 Breach of Obligation .................................... 27
9.1.2 Excluded Liabilities .................................... 27
9.1.3 Violations of Fraudulent Conveyance or Bulk Sales Laws .. 27
9.2 Indemnification by the Purchaser and the Parent ................ 28
9.2.1 Breach of Obligation .................................... 28
9.2.2 Assumed Liabilities ..................................... 28
9.2.3 Post-Closing Operations ................................. 28
9.3 Notice of Claim ................................................ 28
9.4 Defense ........................................................ 28
9.5 Limitations .................................................... 29
9.5.1 Threshold; Maximum ...................................... 29
9.5.2 Time of Assertion ....................................... 29
9.6 Indemnification Exclusive Remedy ............................... 29
9.7 Investigation; Survival of Representations, Warranties,
Covenants and Agreements ..................................... 30
ARTICLE 10 - MISCELLANEOUS ................................................ 30
10.1 Sales, Transfer, and Documentary Taxes, etc. ................... 30
10.2 Expenses ....................................................... 30
10.3 Contents of Agreement; Parties in Interest; etc. ............... 30
10.4 Waiver ......................................................... 31
10.5 Notices ........................................................ 31
10.6 Georgia Law to Govern .......................................... 32
10.7 No Benefit to Others ........................................... 32
10.8 Headings, Gender and Certain Terms ............................. 32
10.9 Schedules and Exhibits ......................................... 32
10.10 Severability ................................................... 33
10.11 Counterparts ................................................... 33
10.12 Assistance of Counsel .......................................... 33
10.13 Time of the Essence ............................................ 33
10.14 Actions and Proceedings ........................................ 33
10.15 Execution by Facsimile ......................................... 33
10.16 Confidentiality ................................................ 33
10.17 No Public Announcements ........................................ 34
10.18 Termination .................................................... 34
10.19 Resolution of Certain Disputes ................................. 35
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ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (the "Agreement"), dated and effective as
of October 1, 2001, is made and entered into by and among The InterCept Group,
Inc., a Georgia corporation (the "Parent"); InterCept Output Solutions, LP, a
Texas limited partnership (the "Purchaser"); HSI Holdings, Inc., a Nevada
corporation ("HSI"); Superior Forms, Ltd., a Texas limited partnership ("SFL");
HSI Properties, Ltd., a Texas limited partnership ("HSI Properties"; HSI
Properties and SFL are together referred to as the "Sellers"); Holmes & Shaw
Limited, Inc., a Nevada corporation ("HSI Limited") and the limited partner of
HSI Properties; Holmes & Shaw General, Inc., a Nevada corporation ("HSI
General") and the general partner of HSI Properties; George V. Shaw, III
("Shaw"), an individual resident of Texas; and Vincent Investment Company, Inc.,
a Texas corporation ("Vincent") and the general partner of SFL (HSI, the
Sellers, HSI Limited, HSI General, Shaw, and Vincent are collectively referred
to as the "Seller Parties").
Recitals:
The Sellers are engaged in the business of providing data processing,
laser document printing, automated mailing services including postal
discounting, record archiving and retrieval, and electronic bill presentment and
payment (collectively, the "Business").
The Purchaser desires to purchase, and the Sellers desire to sell,
substantially all of the assets of the Sellers associated with the Business, and
the Sellers desire to transfer, and the Purchaser desires to assume, certain
liabilities of the Sellers arising in connection with the Business, all upon the
terms and conditions and subject to the limited exceptions set forth in this
Agreement.
NOW, THEREFORE, in consideration of the mutual representations,
warranties, covenants, and agreements of the parties hereinafter set forth, the
parties to this Agreement, intending to be legally bound, do agree as follows:
ARTICLE 1
SALE AND PURCHASE
1.1 Included Assets. Upon the terms and subject to the conditions of
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this Agreement, the Purchaser agrees to purchase, accept, and acquire from the
Sellers, and the Sellers agree to sell, transfer, assign, convey, and deliver to
the Purchaser, at the Closing (as defined in Section 3.1), all of the Sellers'
right, title, and interest in and to all of the assets, real, personal, and
mixed, tangible or intangible, used directly or indirectly in or otherwise
relating primarily to the Business as owned or held by the Sellers, except as
expressly noted in Schedule 1.4 and excluded by Section 1.4 below. Subject to
such express exclusion and qualification, the foregoing rights and assets shall
hereinafter collectively be referred to as the "Assets." Without in any way
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limiting the generality of the foregoing, the Assets shall include all of the
Sellers' right, title, and interest in and to the following, wherever located:
1.1.1 All of the Sellers' service, license, marketing and
other similar agreements and sales contracts used directly or indirectly in or
otherwise relating primarily to the Business (the "License Agreements"),
including the License Agreements disclosed in Schedule 1.1.1;
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1.1.2 All of the Sellers' fixed assets, goods, equipment and
other property used directly or indirectly in or otherwise relating primarily to
the Business, including the property disclosed in Schedule 1.1.2 (but excluding
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the Vehicles as defined in Section 1.1.14);
1.1.3 All inventories of the Sellers and all unused or
reusable materials, work in process, damaged or unfinished goods and supplies,
in each case to the extent used directly or indirectly in or otherwise relating
primarily to the Business (the "Inventory"), including the Inventory disclosed
in Schedule 1.1.3;
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1.1.4 All computer software, databases, and all other
intellectual property, whether owned or licensed, used directly or indirectly in
or otherwise relating primarily to the Business (the "Intellectual Property"),
including the software disclosed in Schedule 1.1.4;
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1.1.5 All office furniture and fixtures used directly or
indirectly in or otherwise relating primarily to the Business, including all
items disclosed in Schedule 1.1.5;
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1.1.6 Sellers' entire leasehold, rental, or other interest
arising under or pursuant to leases of:
(A) real property, including buildings, structures,
and other improvements located thereon, fixtures contained therein, and
appurtenances to them, and easements and other rights relative to them;
(B) equipment, including computer hardware and
associated telecommunications equipment, media, and tools;
(C) office furniture; and
(D) other personalty,
in each case as used directly or indirectly in or otherwise relating
primarily to the Business (the "Leases"), including the Leases
disclosed in Schedule 1.1.6;
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1.1.7 All contracts, agreements, licenses, commitments,
arrangements, and permissions entered into in connection with or otherwise
relating primarily to the Business (the
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"General Contracts"), which items are disclosed in Schedule 1.1.7, to the extent
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not otherwise classified as License Agreements, Leases or Insurance Policies (as
defined in this Agreement);
1.1.8 All business and marketing records, including accounting
and operating records, asset ledgers, inventory records, reports, budgets,
personnel and payroll records of employees of the Sellers to be employed by the
Purchaser, customer lists, supplier lists, information and data respecting
leased or owned equipment, correspondence and mailing lists, advertising
materials and brochures, and other business records used directly or indirectly
in or otherwise relating primarily to the Business or the Assets, in whatever
form they exist;
1.1.9 All governmental approvals, authorizations,
certifications, consents, variances, permissions, licenses, and permits to or
from, or filings, notices, or recordings to or with, federal, state, and/or
local governmental authorities as well as states and jurisdictions outside of
the U.S. (the "Authorizations"), directly or indirectly relating primarily to
the Business, but subject, as to the reassignability to the Purchaser, to the
procurement of the Required Government Consents (as defined in Section 4.4), if
any; the Authorizations consist of the items disclosed in Schedule 1.1.9;
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1.1.10 All claims the Sellers may have against any person
relating to or arising from the Assets or the Business as of the Closing Date,
including rights to recoveries for damages or defective goods, to refunds,
insurance claims, and choses in action ("Seller Claims"), but not including any
such claims under or in connection with the Excluded Assets or the Excluded
Liabilities (as defined in Section 1.4);
1.1.11 Cash in the sum of (a) the amount designated on
Schedule 1.1.11, which equals the amount of the Sellers' prepaid expenses
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received by the Sellers from their customers for subsequent expenditure by the
Sellers for postage in connection with work to be performed by the Sellers, and
thus the Purchaser after the Closing (the "Prepaid Postage"); plus (b) $500,000;
1.1.12 All accounts, trade accounts receivable and all notes,
bonds and other evidences of indebtedness of and rights to receive payments
arising out of sales occurring in the conduct of the Business, including any
rights of the Sellers with respect to any third party collection procedures or
any other actions or proceedings that have been commenced in connection
therewith (the "Accounts Receivable"), including, to the extent not collected
prior to Closing, the Accounts Receivable disclosed in Schedule 1.1.12;
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1.1.13 All prepaid expenses relating to the Business,
including, to the extent not used or applied prior to Closing, the items listed
in Schedule 1.1.13;
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1.1.14 All motor vehicles owned or leased by the Sellers and
used or held for use in the conduct of the Business (the "Vehicles"), including
the Vehicles listed in Schedule 1.1.14; and
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1.1.15 All security deposits deposited by or on behalf of the
Sellers or either of them as lessee or sublessee under any Leases.
1.2 Intent of the Parties. Although the Schedules to this Agreement are
---------------------
intended to be complete, to the extent any rights or assets of the Sellers
relate exclusively to the Business or are otherwise necessary for the ownership
and use of the Assets and the conduct of the Business, but are not properly
itemized or do not appear in the applicable Schedules where required, then,
unless this Agreement otherwise provides directly for the Purchaser to provide
for or obtain such rights or assets in a different way or unless such rights or
assets are specifically included in Excluded Assets, the general language of
Section 1.1 shall govern, and such rights and assets shall nonetheless be deemed
transferred to the Purchaser at Closing. The parties to this Agreement
contemplate that it will be executed on the date specified on the first page of
this Agreement (the "Signing Date") and closed on a later Closing Date as
described and defined in Section 3.1. The representations and warranties in this
Agreement are made first on the Signing Date and then again on the Closing Date,
and the various schedules required under this Article 1, as well as schedules
required under other Articles of this Agreement, are being delivered on the
Signing Date and will be supplemented, amended, or replaced as and if necessary
on the Closing Date so that they are accurate on each such date. The parties to
this Agreement acknowledge, however, that the final amounts of certain assets
and liabilities provided on certain schedules to this Agreement as of the
Closing Date may not be determined with certainty until after the Closing Date.
Accordingly, the parties are providing for the Post-Closing Settlement described
in Section 8.3 and the Holdback as described in Section 3.2.
1.3 Title to and Transfer of Assets. The Sellers agree to convey to the
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Purchaser title to all of the Assets by appropriate documents of transfer and
sale, including such bills of sale, endorsements and assignments, and other good
and sufficient instruments of bargain and sale, in such form as shall be
approved and deemed appropriate by legal counsel for the Purchaser and the
Sellers.
1.4 Excluded Assets. Notwithstanding the foregoing, the Assets shall
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not include any of the following:
1.4.1 certificates of incorporation and of limited
partnership, minute books, stock books, tax returns, books of account or other
records having to do with the corporate or limited partnership organization,
qualifications to conduct business as a foreign corporation or limited
partnership, agreements with registered agents relating to foreign
qualifications, and taxpayer and similar identification numbers, as applicable,
of the Sellers, Vincent, HSI General, HSI, and HSI Limited;
1.4.2 the rights that accrue or will accrue to the Sellers
under this Agreement or any other agreement between a Seller Party and the
Purchaser entered into on or after the date hereof;
4
<PAGE>
1.4.3 the rights to any of the Sellers' claims for any
federal, state, local, or foreign tax refunds;
1.4.4 except as provided in Section 1.1, the deposits, deposit
accounts, and investments plus all other cash, cash equivalents, deposits,
deposit accounts, and investments arising from the Business on or before the
Closing Date;
1.4.5 all insurance and reinsurance, surety, bonding, or
indemnity policies, binders, or contracts, and the benefits of any prior
insurance coverage to the extent still available, as established or obtained
with respect to the Business or the Assets on or before the Closing Date
("Insurance Policies");
1.4.6 all obligations owed to the Sellers from any of the
Seller Parties or any Affiliate of any Seller Party, or any spouse, child or
other relative of any such Affiliate ("Affiliate" when used with reference to
the Sellers means any officer, director or owner of 5% or more, directly or
indirectly, of the outstanding limited partner interests of HSI Properties or
limited partner interests in SFL; "Affiliate" when used with reference to the
Purchaser or the Parent means any officer, director or owner of 5% or more of
the outstanding shares of the Parent); and
1.4.7 the other assets, properties or rights disclosed in
Schedule 1.4 (collectively with the other Assets listed in or pursuant to this
Section 1.4, the "Excluded Assets").
ARTICLE 2
ASSUMPTION OF LIABILITIES BY THE PURCHASER
2.1 Assumed Liabilities. At and after the Closing, the Purchaser shall
-------------------
assume and pay in a timely fashion and be responsible for (a) each liability and
obligation of HSI, the Sellers or any of them set forth on the balance sheet
that is part of the Financial Statements (as defined in Section 4.6) and each
liability and obligation incurred by HSI, the Sellers or any of them in the
ordinary course of business thereafter (but in each case the Purchaser shall
assume, with respect to liabilities and obligations of HSI, only those
liabilities and obligations that HSI has assigned or transferred to HSI
Properties through HSI Limited and HSI General); (b) all liabilities and
obligations under the General Contracts, Licenses, Leases and Authorizations;
and (c) that certain note (the "NBC Note") payable by HSI to NBC Bank in
connection with the financing of certain Xerox equipment and having an
outstanding principal balance of approximately $260,000 (collectively, and
subject to the express exclusions listed in Section 2.2 below, the "Assumed
Liabilities").
2.2 Liabilities Not Assumed. Notwithstanding the provisions of Section
-----------------------
2.1, the Purchaser shall not assume or be responsible for any of the following
liabilities or obligations (the "Excluded Liabilities"):
5
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2.2.1 any product liability or similar claim for injury to
person, business or property, regardless of when made or asserted, which arises
out of or is based upon any express or implied representation, warranty,
agreement, or guarantee made by the Seller Parties, or alleged to have been made
by the Seller Parties, or which is imposed or asserted to be imposed by
operation of law, in connection with any service performed or product sold or
leased by or on behalf of the Seller Parties on or before the Closing, including
any claim relating to any product delivered in connection with the performance
of such service and any claim seeking recovery for consequential damages, lost
revenue or income;
2.2.2 any governmental fees, costs, levies, assessments,
fines, penalties or interest thereon, including but not limited to sales or use
taxes or other taxes, assessments and penalties (A) payable with respect to the
operation of the Business or ownership of the Assets by the Seller Parties on or
before the Closing, or from other properties or operations of the Seller Parties
unrelated to the Business or the Assets, or (B) incident to or arising as a
consequence of the negotiation or consummation by the Seller Parties of this
Agreement and the transactions contemplated by this Agreement;
2.2.3 any liability or obligation attributable to the Excluded
Assets;
2.2.4 any liability or obligation of the Seller Parties of any
kind, known or unknown, contingent or otherwise, resulting from any other
covenant, agreement, or indemnity of the Seller Parties in this Agreement or the
other Purchase Documents to be executed and delivered by the Sellers (the term
the "Purchase Documents" means this Agreement and the schedules, exhibits, and
other documents, agreements, certificates, and instruments executed and
delivered pursuant to or in connection with this Agreement);
2.2.5 any liability or obligation resulting from violations of
any laws or regulations applicable to the Business or the Assets by the Seller
Parties before the Closing Date or from infringement of third-party rights or
interests with respect to the Business before the Closing Date;
2.2.6 except for those liabilities specifically assumed by the
Parent pursuant to Sections 8.9 and 8.10, any employee liabilities relating to
present and past employees of the Business with respect to Plans (as defined in
Section 4.18.1), programs, policies, commitments and other benefit entitlements
established or existing on or before Closing (whether or not such liabilities
are accrued or payable at Closing, and whether or not such liabilities are
contingent in nature), including
(A) any liability or obligation for workers'
compensation;
(B) any current or future liabilities to employees
retiring on, before, or after the Closing, and their dependents
(excluding employees employed by the Purchaser after the Closing and
who subsequently retire);
6
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(C) any current or future liabilities for benefits
that may have been accrued or earned by any employees associated with
the Business on or before Closing under any pension Plans relating to
service before the Closing Date;
(D) any current or future liabilities for claims
incurred before Closing and related expenses with respect to any
employees associated with the Business under any welfare or disability
plans established or existing at or before Closing, regardless of when
filed with the Purchaser, the Sellers, or the claims administrator for
any such plan;
(E) any retrospective premium on pension, savings,
thrift, or profit-sharing Plan contribution relating to any employees
associated with the Business incurred or accrued before the Closing
Date, regardless of when invoiced or recorded; and
(F) any monetary liability for severance payments
that may arise at any time in favor of any of the Sellers' employees
under any Plan, program, policy, commitment, or any other benefit
entitlement of Sellers, provided such monetary liability relates to
periods of employment before the Closing;
2.2.7 any Litigation (as defined in Section 4.15) against the
Seller Parties or the Assets, if the cause of action or activities giving rise
to such litigation arise or accrue before the Closing Date;
2.2.8 any liability or obligation of the Seller Parties
arising or incurred in connection with the negotiation, preparation and
execution of this Agreement and the transactions contemplated by this Agreement
and fees and expenses of counsel, accountants, brokers and other experts
employed by the Seller Parties (provided that if the Sellers do not obtain one
or more Required Contract Consents (as defined in Section 6.2.7) or the parties
fail to obtain any other consent that is required for the assignment by the
Sellers and the assumption by the Purchaser of any General Contract, License
Agreement, Lease, Authorization, or license of Intellectual Property included
within the Assets, and notwithstanding such failure, the Purchaser elects to
proceed with the Closing, the Purchaser shall assume and be responsible for any
liability or obligation created by the failure to obtain such consents);
2.2.9 any obligation for money borrowed or evidenced by bonds,
debentures, notes or similar instruments, and any obligation of another Person
that a Seller Party has guaranteed ("Person" means an individual, entity,
unincorporated association, or a government or any agency or political
subdivisions thereof), other than the NBC Note;
2.2.10 any obligations owed by a Seller Party to any other
Seller Party or any Affiliate of any Seller Party, or any spouse, child or other
relative of any such Affiliate; and
2.2.11 any obligation under any General Contract, License,
Lease or Authorization that is not listed on a schedule to this Agreement on the
Closing Date.
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ARTICLE 3
CLOSING AND PURCHASE PRICE
3.1 Closing. The closing of the purchase and sale of the Assets and the
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transfer and assumption of the Assumed Liabilities (the "Closing") shall take
place at the offices of Nelson Mullins Riley & Scarborough, L.L.P., Atlanta,
Georgia at 10:00 a.m. on or before October 5, 2001, or at such other time as the
parties hereto mutually agree upon (the "Closing Date").
3.2 Purchase Price. The aggregate purchase price consideration for
--------------
all of the Assets shall be $25,000,000 plus the amount of the Assumed
Liabilities (collectively, the "Purchase Price"), paid and subject to adjustment
as follows:
(a) $20,000,000 to be paid to the Sellers in cash or by wire
transfer of immediately available funds (less the "Holdback" of $250,000 in cash
to facilitate the Post-Closing Settlement as provided for in Section 8.3, the
"Cash Payment"); and
(b) $5,000,000 to be paid to the Sellers in cash or by wire
transfer of immediately available funds (the "Escrow Cash"), to be placed into
escrow as provided in Section 3.4 below.
3.3 Fair Market Value of Assets. The parties agree that the Purchase
---------------------------
Price represents the fair market value of the Assets. The Purchase Price shall
be allocated among the Assets acquired and Assumed Liabilities assumed under
this Agreement as disclosed in Schedule 3.3, which shall be agreed upon by the
------------
parties no later than the Closing Date. Each of the Sellers, the Purchaser, and
the Parent covenants and agrees that it will not take a position on any income
tax return, before any governmental agency charged with the collection of any
income tax, or in any judicial proceeding that is in any way inconsistent with
the terms of this Article 3.
3.4 Establishment of Escrow. The Escrow Cash shall be delivered at
-----------------------
Closing to First Union National Bank (the "Escrow Agent"), which shall hold the
Escrow Cash in escrow (the "Escrow") pursuant to the terms of an Escrow
Agreement in the form of Exhibit 3.4 (the "Escrow Agreement").
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ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE SELLER PARTIES
The Seller Parties represent and warrant, jointly and severally, to the
Purchaser and the Parent that, except as set forth on the disclosure schedules
attached to this Agreement, each of which exceptions shall specifically identify
the relevant subsection of this Article to which it relates, as follows:
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4.1 Entity Existence. HSI is a corporation duly incorporated, validly
----------------
existing and in good standing under the laws of the State of Nevada, and SFL and
HSI Properties are limited partnerships duly organized, validly existing, and in
good standing under the laws of the State of Texas. Vincent is the sole general
partner of SFL and is a corporation duly incorporated, validly existing, and in
good standing under the laws of the State of Texas. HSI General is the sole
general partner of HSI Properties and is a corporation duly incorporated,
validly existing, and in good standing under the laws of the State of Nevada.
HSI Limited is the sole limited partner of HSI Properties and is a corporation
duly incorporated, validly existing, and in good standing under the laws of the
State of Nevada. The Sellers have the partnership power and authority to conduct
the Business and to own and lease all of their properties and assets related to
the Business (including the Assets). Each of the Sellers is duly qualified or
licensed to do business and is in good standing under each jurisdiction in which
the nature of its business or the ownership or leasing of its properties makes
such qualification necessary, other than in such jurisdictions where the failure
to be so qualified to do business or in good standing (individually or in the
aggregate) would not have a Material Adverse Effect on such Seller. "Material
Adverse Effect" shall mean, with respect to any entity or group of entities, a
material adverse effect on the business, operations, assets, liabilities,
financial condition, or results of operations of such entity or group of
entities taken as a whole, or on the ability of such entity or group of entities
to perform in all material respects its or their obligations under this
Agreement, or which would prevent or materially delay the consummation of the
transactions contemplated by this Agreement.
4.2 Partnership Power; Authorization; Enforceable Obligations. The
---------------------------------------------------------
Sellers have the partnership power and authority, as applicable, to execute and
deliver this Agreement and the other Purchase Documents and to perform their
obligations under this Agreement and under those documents. The Sellers have
taken all necessary partnership action to authorize the execution and delivery
of this Agreement and the Purchase Documents and the consummation of the
transactions contemplated by this Agreement and those documents. This Agreement
and the Purchase Documents constitute the legal, valid, and binding obligations
of the Sellers, enforceable against the Sellers in accordance with their terms
and conditions, except as such enforcement may be subject to or limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect affecting creditors' rights generally, and by general
principles of equity.
4.3 No Conflict. Neither the execution and delivery of this Agreement
-----------
and the other Purchase Documents, nor the consummation of the transactions
contemplated by this Agreement or those documents, will (a) violate any law,
regulation, ordinance, governmental restriction, order, judgment, or decree
(collectively, "Laws") applicable to the Seller Parties, the Business, or the
Assets, (b) violate or conflict with any provision of any articles of
incorporation, certificate of limited partnership, bylaw, limited partnership
agreement or other governing or organizational instrument of the Sellers, HSI,
HSI General, HSI Limited, or Vincent, or (c) conflict with, result in the breach
of, or constitute a default under any mortgage, lease, indenture, license,
instrument, trust, contract, agreement, or other commitment or arrangement to
which any Seller Party is a
9
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party or by which the Sellers or any of the Assets are bound, except where such
violation, conflict, breach or default would not have a Material Adverse Effect
on the Sellers.
4.4 Required Government Consents. Listed in Schedule 4.4 (such
---------------------------- ------------
scheduled items being referred to in this Agreement as the "Required Government
Consents") is each approval, authorization, certification, consent, variance,
permission, license, or permit to or from any government or governmental
authority held by the Sellers that is related to the operation of the Business.
Other than the obtaining by the Purchaser of such Required Government Consents
in its own name, no notice, filing, or recording to or with any government or
governmental authority is necessary for the execution and delivery of this
Agreement and the Purchase Documents by the Sellers or the consummation by the
Sellers of the transactions contemplated by this Agreement or those documents,
or the ownership and use of the Assets and the conduct of the Business by the
Sellers.
4.5 Five Largest Customers. Listed in Schedule 4.5 are the Sellers'
---------------------- ------------
combined five largest customers in terms of revenue received from September 1,
2000 through August 31, 2001.
4.6 Financial Matters. The unaudited combined balance sheet of the
-----------------
Sellers (or their predecessors, as applicable) as of August 31, 2001 and the
related unaudited combined statements of operations and cash flow for the period
ending August 31, 2001 (the "Financial Statements") fairly present the combined
financial position of the Sellers (or their predecessors, as applicable) as of
the date of those statements and the results of their operations for the period
of those statements. Except as disclosed on Schedule 4.6, the Financial
Statements were prepared in accordance with generally accepted accounting
principles consistently applied ("GAAP"); provided, however, that the Purchaser
acknowledges that the Financial Statements have not been audited. Except as
disclosed on Schedule 4.6 (for liabilities not required to be disclosed under
------------
GAAP), the Financial Statements contain all of the liabilities incurred in
operating the Business as of the date of such Financial Statements. The Adjusted
Net Assets of the Sellers as of the Signing Date and as of Closing Date, as
applicable, is not less than $1,700,000. "Adjusted Net Assets" shall be
calculated as specified in Schedule 4.6A.
-------------
4.7 Absence of Changes. Except for the execution and delivery of this
------------------
Agreement and the transactions to take place pursuant to this Agreement on or
before the Closing Date, since the date of the balance sheet included in the
Financial Statements there has not been any event or development which,
individually or together with other such events, could reasonably be expected to
result in a Material Adverse Effect on the Sellers. Without limiting the
foregoing, except as disclosed in Schedule 4.7, there has not occurred, between
------------
the date of the date of the balance sheet included in the Financial Statements
and the Signing Date or the Closing Date, as applicable, any of the following:
4.7.1 (a) any increase in the salary, wages or other
compensation of, or any payment of severance benefits to, any employee of any
Seller Party whose annual salary is, or after giving effect to such change would
be, $25,000 or more; (b) any establishment or modification of (A) targets,
goals, pools or similar provisions in respect of any fiscal year
10
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under any Plan or any employment-related contract or other compensation
arrangement with or for such employees or (B) salary ranges, increase guidelines
or similar provisions in respect of any Plan or any employment-related contract
or other compensation arrangement with or for such employees; or (c) any
adoption, entering into or becoming bound by any Plan, employment-related
contract or collective bargaining agreement, or amendment, modification or
termination (partial or complete) of any Plan (other than pursuant to Section
8.10), employment-related contract or collective bargaining agreement, except to
the extent required by applicable Law;
4.7.2 (a) incurrences by the Sellers of indebtedness with
respect to the conduct of the Business in an aggregate principal amount
exceeding $25,000 (net of any amounts discharged during such period), or (b) any
voluntary purchase, cancellation, prepayment or complete or partial discharge in
advance of a scheduled payment date with respect to, or waiver of any right of
either Seller under, any indebtedness of or owing to either Seller with respect
to the conduct of the Business (other than as contemplated in Section 4.7
above);
4.7.3 any physical damage, destruction or other casualty loss
(whether or not covered by insurance) affecting any of the plant, real or
personal property or equipment of the Sellers used or held for use in the
conduct of the Business in an aggregate amount exceeding $25,000;
4.7.4 any material change in (a) any pricing, investment,
accounting, financial reporting, inventory, credit, allowance or tax practice or
policy of the Business or (b) any method of calculating any bad debt,
contingency or other reserve of the Business for accounting, financial reporting
or tax purposes;
4.7.5 (a) any acquisition or disposition of any assets and
properties used or held for use in the conduct of the Business, other than
Inventory in the ordinary course of business consistent with past practice and
other acquisitions or dispositions not exceeding in either case $25,000 in the
aggregate; or (b) any creation or incurrence of a Lien (other than Permitted
Liens) on any assets and properties used or held in the conduct of the Business
(the terms "Lien" and "Permitted Lien" are defined in Section 4.9);
4.7.6 any entering into, amendment, modification, termination
(partial or complete) or granting of a waiver under or giving any consent with
respect to any General Contract, Lease, License Agreement or Insurance Policy
that is required (or had it been in effect on the date hereof would have been
required) to be disclosed under Section 1.1 above;
4.7.7 capital expenditures or commitments for additions to
property, plant or equipment used or held for use in the conduct of the Business
constituting capital assets in an aggregate amount exceeding $25,000;
11
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4.7.8 any transaction with any Affiliate of the Sellers or
with any spouse, child or other relative of any such Affiliate (a) outside the
ordinary course of business consistent with past practice or (b) other than on
an arm's-length basis;
4.7.9 any entering into of a contract to do or engage in any
of the foregoing after the date hereof; or
4.7.10 any other transaction involving or development
affecting the Business or the Assets outside the ordinary course of business
consistent with past practice.
4.8 No Undisclosed Liabilities. Except as reflected or reserved against
--------------------------
in the balance sheet included in the Financial Statements or in the notes to
them or as disclosed Schedule 4.8, there are no liabilities against, relating to
------------
or affecting the Business or any of the Assets, other than liabilities incurred
in the ordinary course of business consistent with past practice which in the
aggregate could not reasonably be expected to result in a Material Adverse
Effect on the Sellers.
4.9 Title to Property. The Purchaser at Closing shall obtain good and
-----------------
marketable title to all of the Assets free and clear of all Liens whatsoever,
other than (a) the Leases disclosed in Schedule 1.1.6, (b) Permitted Liens, and
--------------
(c) as disclosed on Schedule 4.9. "Lien" means any mortgage, pledge, assessment,
------------
ecurity interest, lease, lien, adverse claim, levy, charge or other encumbrance
of any kind, or any conditional sale contract, title retention contract or other
contract to give any of the foregoing, and "Permitted Lien" means (a) any Lien
for taxes not yet due or delinquent or being contested in good faith by
appropriate proceedings for which adequate reserves have been established in
accordance with GAAP; (b) any statutory Lien arising in the ordinary course of
business by operation of Law with respect to a liability that is not yet due or
delinquent; (c) any minor imperfection of title or similar Lien which
individually or in the aggregate with other such Liens does not materially
impair the value of the property subject to such Lien or the use of such
property in the conduct of the Business; (d) zoning, building code and other
land use Laws and agreements relating to the use or occupancy of property or the
activities conducted thereon and (e) liens securing the NBC Note.
4.10 Condition of Property. All of the tangible Assets are in good
---------------------
operating order, condition, and repair, ordinary wear and tear excepted, and are
suitable for use in the Business in the ordinary course, as presently operated.
4.11 Inventory. All inventory reflected on the balance sheet included
--------------
s part of the Financial Statements as of the date of such balance sheet was,
and all inventory transferred to the Purchaser as of the Closing Date will be,
in a quantity and quality usable or salable in the ordinary course of business
of the Sellers consistent with past practice. The Financial Statements reflect
appropriate write-offs and mark-downs for inventory that is used, obsolete,
unusable or unable to be sold in the ordinary course of business of the Sellers.
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4.12 Contracts - General. The License Agreements listed in Schedule
------------------- --------
1.1.1, the Leases listed in Schedule 1.1.6, and the General Contracts disclosed
----- --------------
in Schedule 1.1.7 constitute all contracts, agreements, licenses, leases and
--------------
other commitments and arrangements of the Sellers in effect as of the Signing
Date and the Closing Date, as applicable, and included in the Assets. All such
contracts are valid, binding, and enforceable against the Sellers in accordance
with their terms and are in full force and effect; provided that if the Sellers
do not obtain one or more Required Contract Consents, and notwithstanding such
failure, the Purchaser elects to proceed with the Closing, any breach of such
contracts that results from the failure to obtain such consent shall not be
deemed to be a breach of this representation and warranty. Except as noted on
Schedule 4.12, to the knowledge of the Seller Parties, there are no existing
-------------
defaults by the Sellers under any such contracts and no act, event, or omission
has occurred that, whether with or without notice, lapse of time, or both, would
constitute a default under those contracts.
4.13 Intellectual Property.
---------------------
4.13.1 Schedule 1.1.4 lists and describes all Intellectual
--------------
Property necessary to the conduct of the Business and specifies which items are
owned and to which items the Sellers have rights as a licensee or otherwise.
4.13.2 The Intellectual Property constitutes or represents all
of the intellectual property used in the Business as presently conducted by the
Sellers, and the Sellers' ownership and use rights with respect to the
Intellectual Property are free and clear of Liens other than Permitted Liens.
The Sellers either own, have a valid license to use, or otherwise have such
rights as may be necessary to use all of the Intellectual Property, and, except
as provided on Schedule 1.1.4, all such rights can be transferred to the
--------------
Purchaser.
4.13.3 The Sellers have, and immediately after the Closing the
Purchaser will have, rights to use all computer software and databases that are
used in the Business as presently conducted by the Sellers and all documentation
relating to all such computer software and databases.
4.14 Leases. The Leases disclosed in Schedule 1.1.6 constitute all
------ --------------
leasing or rental contracts, agreements, and other commitments and arrangements
in effect as of the Closing Date and included in the Assets. All Leases are
valid, binding, and enforceable against a Seller in accordance with their terms
and are in full force and effect. To the knowledge of the Seller Parties, there
are no existing defaults by the Sellers thereunder and no act, event, or
omission has occurred that, whether with or without notice, lapse of time, or
both, would constitute a default thereunder.
4.15 Litigation. No claim, action, suit, proceeding, inquiry, hearing,
----------
arbitration, administrative proceeding, or investigation (collectively,
"Litigation") is pending, or, to the knowledge of the Seller Parties, threatened
against the Sellers, or their present or former directors, officers, or
employees, affecting, involving, or relating to the Business or any of the
Assets. The Seller Parties do not know of any basis for Litigation against the
Sellers (or the
13
<PAGE>
Purchaser upon acquisition of the Business), their present or former directors,
officers, or employees, affecting, involving, or relating to the Business or the
Assets.
4.16 Court Orders, Decrees, and Laws.
-------------------------------
4.16.1 Compliance with Laws. There is no outstanding or, to
--------------------
the knowledge of the Seller Parties, threatened order, writ, injunction, or
decree of any court, governmental agency, or arbitration tribunal against the
Sellers affecting, involving, or relating in an adverse manner to the Business
or the Assets. The Sellers are not in violation of any Laws affecting,
involving, or relating to the Business or the Assets, except where noncompliance
has no Material Adverse Effect on the Business or the Assets, and the Sellers
have received no notices of any such alleged violation.
4.16.2 Adequacy of Authorizations. The Authorizations
--------------------------
constitute all approvals, authorizations, certifications, consents, variances,
permissions, licenses, or permits to or from, or filings, notices, or recordings
to or with, U.S. or non-U.S., federal, state, or local governmental authorities
that are required for the ownership and use of the Assets and the conduct of the
Business under all applicable Laws. The Sellers are in compliance with all
material terms and conditions of such required Authorizations. All of the
Authorizations are in full force and effect, and, to the Seller Parties'
knowledge, no suspension or cancellation of any of them is being threatened, nor
will any of the Authorizations be affected by the consummation of the
transactions described in this Agreement, except to the extent any such
Authorizations are assignable or transferable only upon receipt of the Required
Government Consents.
4.16.3 Environmental Matters. The operations of the Sellers
---------------------
forming a part of the Business comply, and have complied, in all material
respects with all applicable Laws relating to pollution or protection of the
environment ("Environmental Laws"). The Sellers have not received any notice of
any pending or threatened investigation, proceeding or claim with respect to the
Business or the Assets to the effect that the Sellers are or may be liable to
any person or entity, or responsible or potentially responsible for the costs of
any remedial or removal action or other cleanup costs, as a result of
noncompliance with any Environmental Laws. Except as set forth on Schedule
4.16.3 attached hereto, to the knowledge of the Seller Parties, there is no past
or present action, activity, condition or circumstance that could be expected to
give rise to any such liability on the part of the Sellers to any person or
entity or for any such cleanup costs.
4.17 Personnel and Compensation.
--------------------------
4.17.1 List of Personnel. Schedule 4.17 is a true and complete
----------------- -------------
list of the names and current compensation levels of (a) all salaried or annual
employees and (b) all independent contractors and/or consultants (excluding
vendors and suppliers) involved in the Business.
4.17.2 Employee Relations. There is no labor strike, dispute,
------------------
slowdown, stoppage, or similar activity pending or, to the knowledge of the
Seller Parties, threatened against
14
<PAGE>
the Sellers pertaining to the Business or the employees involved in the
Business. There are no charges, investigations, administrative proceedings, or
formal complaints of discrimination (including discrimination based upon sex,
age, marital status, race, national origin, sexual preference, handicap or
veteran status) pending or, to the knowledge of the Seller Parties, threatened
before the Equal Employment Opportunity Commission or any federal, state, or
local agency or court against the Sellers pertaining to the Business or the
employees of the Business, and, to the knowledge of the Seller Parties, no basis
for any such charge, investigation, administrative proceeding, or complaint
exists.
4.17.3 Compliance with Immigration and Labor and Employment
----------------------------------------------------
Laws. The Sellers have conducted a review of their Employment Eligibility
----
Verification forms (Form I-9) and various personnel and payroll records and
represent there are no violations of applicable Laws, with respect to
immigration matters.
4.18 Employee Benefit Plans and Arrangements.
---------------------------------------
4.18.1 List of Plans and Obligations. The employee benefit
-----------------------------
plans and arrangements set forth in Schedule 4.18 is a complete and accurate
-------------
list and description of all plans, arrangements, agreements, commitments,
promises and other benefit or compensatory obligations of the Sellers (other
than any de minimis fringe benefit as defined in Section 132(e) of the Internal
Revenue Code of 1986, as amended (the "Code")), including pension, retirement,
profit-sharing, deferred compensation, stock option, employee stock ownership,
severance pay, vacation, sick leave without compensation, bonus and other
incentive plans, every medical, vision, dental and other health plan, every life
insurance plan and every other written or unwritten employee program,
arrangement, agreement or understanding, commitment or method of contribution or
compensation, whether formal or informal, whether funded or unfunded, and other
obligations under which the Sellers have been, are or will be obligated to
provide benefits to any current or former employee, retiree, director,
independent contractor, shareholder, officer, consultant or other beneficiary,
or dependent, spouse or other family member or beneficiary of such Employee,
retiree, director, independent contractor, shareholder, officer, consultant, or
other beneficiary of the Sellers, whether during their employment with the
Sellers or after the termination of such employment (the "Plans" and the
"Beneficiaries," respectively).
4.18.2 Compliance. All of the Plans have been maintained,
----------
funded and administered in compliance, in all material respects, with all Laws,
including the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), and the Code, and all regulations and rulings related to those Laws.
There are no penalties, interest, taxes related to any of the Plans due to any
federal or state authority, and there is no pending or threatened litigation or
other contests related to any of the Plans.
4.18.3 No Liabilities or Obligations. The Sellers have made
-----------------------------
full and timely payment of all amounts required under the terms of each of the
Plans to have been paid as contributions to such Plans, and all amounts that
have accrued but have not yet been paid have been accurately reflected on the
Financial Statements.
15
<PAGE>
4.18.4 No Payments. The consummation of the sale and purchase
-----------
of the Assets pursuant to this Agreement will not (a) entitle any Beneficiary to
any severance pay or any other payment contingent upon a change in control or
ownership of the Sellers or the assets of either of them, or (b) accelerate the
time of payment or vesting or increase the amount of any compensation or benefit
due to any Beneficiary other than as required by Section 411(d)(3) of the Code.
4.18.5 No Multi-Employer Plans. None of the Plans is a
-----------------------
multi-employer plan, as defined in section 3(37) of ERISA.
4.19 Insurance Policies. There are no pending material claims against
------------------
insurance established or obtained with respect to the Business by the Sellers as
to which insurers have denied liability or are defending under any reservation
of rights, and, to the knowledge of the Seller Parties, there exists no material
claim under such insurance that has not been properly filed by the Sellers.
4.20 Broker's or Finder's Fees. Other than The Montana Group, whose fee
-------------------------
will be paid by the Sellers, the Seller Parties have not authorized any person
to act as broker or finder or in any other similar capacity in connection with
the transactions contemplated by this Agreement.
4.21 Accounts Receivable. Except as set forth in Schedule 4.21, the
------------------- -------------
Accounts Receivable (a) arose from bona fide transactions in the ordinary
course of business and are payable on ordinary trade terms, (b) are not subject
to any valid set-off or counterclaim, (c) do not represent obligations for goods
sold on consignment, on approval or on a sale-or-return basis or subject to any
other repurchase or return arrangement, (d) are collectible in the ordinary
course of business consistent with past practice in their aggregate recorded
amounts, net of any applicable reserve reflected in the balance sheet included
in the Financial Statements, and (e) are not the subject of any actions or
proceedings brought by or on behalf of the Sellers.
4.22 Vehicles. Schedule1.1.14 contains a true and complete list of all
-------- --------------
motor vehicles owned or leased by the Sellers and used or held for use in the
conduct of the Business. Except as disclosed in Schedule1.1.14, the Sellers have
--------------
good and valid title to, or has valid leasehold interests in or valid rights
under contract to use, each Vehicle, free and clear of all Liens other than
Permitted Liens.
4.23 No Guarantees. None of the liabilities of the Business or of the
-------------
Sellers incurred in connection with the conduct of the Business is guaranteed by
or subject to a similar contingent obligation of any other Person, nor has
either Seller guaranteed or become subject to a similar contingent obligation in
respect of the liabilities of any customer, supplier or other Person to whom
either Seller sells goods or provides services in the conduct of the Business or
with whom such Seller otherwise has significant business relationships in the
conduct of the Business.
16
<PAGE>
4.24 Tax Matters.
-----------
4.24.1 Tax and Social Returns. The Sellers have correctly and
----------------------
timely (a) filed all Tax and Social returns required to be filed in the manner
required by Tax and Social authorities, (b) responded to information requested
by said authorities and (c) made all Tax and Social payments at due dates. "Tax"
or "Taxes" means all forms of levies, taxes, customs and other duties normally
deemed to be of a fiscal or customs nature, including (a) all taxes levied,
imposed or assessed under the Code, or any other statute, rule, ordinance or
Law, in the United States or elsewhere; (b) taxes in the nature of sales tax,
consumption tax, value added tax, payroll tax, group tax, undistributed profits
tax, fringe benefits tax, recoupment tax, withholding tax, land tax, water
rates, municipal rates, stamp duties, gift duties or other state, territorial,
provincial or municipal charges or impositions levied, imposed or collected by
any governmental body; and (c) any additional tax, interest, penalty, charge,
fee or other amount of any kind assessed, charged or imposed in relation to the
non-, late, short or incorrect payment of the same or the failure to file any
return. "Social" refers to employment-related obligations of the Sellers,
including all actual or contingent liabilities relating to unemployment, health,
injury, death and retirement as well as any and all items of a similar nature.
4.24.2 Inquiries, Investigations, and Audits. Except as set
-------------------------------------
forth in Schedule 4.24.2, neither Seller is the subject matter of any inquiry,
investigation or audit relating to Tax or Social matters and has not been
informed of any proposed audit.
4.24.3 Returns Furnished. Schedule 4.24.3 contains true and
----------------- ---------------
complete copies of (a) income tax audit reports, statements of deficiencies or
audit response letters relating to Taxes, if any, and (b) all Tax returns for
the Sellers for all periods since January 1, 1998.
4.25 Disclosure. No representation, warranty, or statement made by the
----------
Seller Parties in this Agreement, the Purchase Documents or in any document or
certificate furnished or to be furnished to the Purchaser or the Parent pursuant
to this Agreement contains or will contain any untrue statement or omits or will
omit to state any fact necessary to make the statements contained in this
Agreement or in those documents, under the circumstances in which they were
made, not materially misleading.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF PURCHASER AND PARENT
The Purchaser and the Parent represent and warrant, jointly and
severally, to the Sellers as follows:
5.1 Corporate Existence. The Parent is a corporation duly organized,
-------------------
validly existing and in good standing under the Laws of the State of Georgia.
The Purchaser is a limited partnership duly organized, validly existing, and in
good standing under the Laws of the State of Texas. InterCept TX I, LLC, a
Georgia limited liability company, is the sole general
17
<PAGE>
partner of the Purchaser and is a limited liability company duly organized,
validly existing and in good standing under the Laws of the State of Georgia.
The Parent and the Purchaser have the corporate and partnership power and
authority, as applicable, to own and operate their businesses and assets.
5.2 Corporate and Partnership Power and Authorization. The Parent and
-------------------------------------------------
the Purchaser have the corporate and partnership power, authority, and legal
right to execute and deliver this Agreement and the other Purchase Documents and
to perform their obligations under this Agreement and under those documents. The
execution, delivery, and performance of this Agreement and the Purchase
Documents by the Parent and the consummation of the transactions contemplated by
this Agreement and those other documents have been duly authorized by all
necessary corporate action of the Parent. The execution, delivery, and
performance of this Agreement and the Purchase Documents by the Purchaser and
the consummation of the transactions contemplated by this Agreement and those
other documents have been duly authorized by all necessary partnership action of
the Purchaser. This Agreement and the Purchase Documents constitute the legal,
valid, and binding obligations of the Purchaser and the Parent, enforceable
against each of them, as applicable, in accordance with their terms and
conditions, except as such enforcement may be subject to or limited by
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance,
fraudulent transfer, or other similar Laws now or hereafter in effect affecting
creditors' rights generally, and by general principles of equity.
5.3 No Conflict. Neither the execution and delivery of this Agreement
-----------
and the other Purchase Documents, nor the consummation of the transactions
contemplated by this Agreement or by those documents, will (a) violate any Laws
applicable to the Parent or the Purchaser; (b) violate or conflict with any
provision of any articles of incorporation, charter, bylaw, partnership
agreement, partnership certificate, or other governing or organizational
instrument of the Parent or the Purchaser; or (c) conflict with, result in the
breach of, or constitute a default under any mortgage, lease, indenture,
license, instrument, trust, contract, agreement, or other commitment or
arrangement to which the Parent or the Purchaser is a party or by which the
Parent or the Purchaser or any of their respective Assets are bound, except
where such violation, conflict, breach or default would not have a Material
Adverse Effect on the Parent and the Purchaser.
5.4 Broker's or Finder's Fees. Neither the Purchaser nor the
-------------------------
Parent has authorized any person to act as broker, finder, or in any other
similar capacity in connection with the transactions contemplated by this
Agreement.
5.5 Outstanding Stock. The Parent indirectly owns all of the
-----------------
outstanding general partner and limited partner interests in the Purchaser. The
Parent owns all of the outstanding member interests in InterCept Services, LLC,
a Georgia limited liability company that is (a) the sole member and manager of
InterCept TX I, LLC, a Georgia limited liability company that is the sole
general partner of the Purchaser; and (b) the sole limited partner of the
Purchaser.
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5.6 Financing. As of the Signing Date and the Closing Date, the
---------
Purchaser and the Parent have secured adequate financing to purchase the Assets
in accordance with this Agreement and to fulfill their obligations hereunder and
under the Purchase Documents.
ARTICLE 6
CONDITIONS TO CLOSING
6.1 Conditions to the Sellers' Obligations. Each of the obligations of
--------------------------------------
the Sellers to be performed hereunder shall be subject to the satisfaction (or
waiver by the Sellers) at or prior to the Closing Date of each of the following
conditions:
6.1.1 The representations and warranties of the Purchaser and
the Parent contained in this Agreement shall be true on and as of the Closing
Date (other than representations and warranties that speak as of a specified
date).
6.1.2 The Purchaser and the Parent shall have performed and
complied with all agreements, obligations, covenants, and conditions required by
this Agreement to be performed or complied with by them on or prior to the
Closing.
6.1.3 No Litigation shall be threatened or pending against the
Parent or the Purchaser before any court or governmental agency that, in the
reasonable opinion of counsel for the Sellers, could result in the restraint or
prohibition of any such party, or the obtaining of damages or other relief from
such party, in connection with this Agreement or the consummation of the
transactions contemplated by this Agreement.
6.1.4 The execution, delivery, and performance of this
Agreement by the Purchaser shall have been duly authorized by the Board of
Directors of the Parent. The execution, delivery, and performance of this
Agreement by the Purchaser shall have been duly authorized by the board of
managers of InterCept TX I, LLC for itself and the Purchaser. The Sellers shall
have received copies of all resolutions pertaining to such authorizations,
certified by the applicable corporate secretary.
6.1.5 The Purchaser shall have delivered to the Sellers a
certificate to the effect that each of the conditions specified in Sections
6.1.1 through 6.1.4 above is satisfied in all material respects.
6.1.6 The Parent and the Purchaser, as applicable, shall have
delivered or caused to be delivered to the Sellers or Shaw, as applicable, all
of the following agreements:
(A) the Non-solicitation Agreement substantially in
the form attached to this Agreement as Exhibit 6.1.6(A) (the
----------------
"Non-solicitation Agreement");
(B) the Escrow Agreement;
19
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(C) the Stock Option Agreement for Shaw substantially
in the form attached to this Agreement as Exhibit 6.1.6(C) (the "Shaw
----------------
Stock Option Agreement");
(D) the Stock Option Agreements for certain employees
of the Sellers substantially in the form attached to this Agreement as
Exhibit 6.1.6(D) (the "Employee Stock Option Agreements");
---------------
(E) the Assignment and Assumption Agreement
substantially in the form attached to this Agreement as Exhibit 6.1.6
-------------
(E) as required to assign the lease for the premises of the Business to
the Purchaser (the "Lease Assignment"); and
(F) the Bill of Sale and Assumption substantially in
the form attached to this Agreement as Exhibit 6.1.6(F), pursuant to
----------------
which the Sellers sell the Assets to the Purchaser and the Purchaser
assumes and agrees to pay and perform the Assumed Liabilities (the
"Bill of Sale and Assumption Agreement").
6.1.7 The Sellers shall have received the opinion of Nelson
Mullins Riley & Scarborough, L.L.P., counsel to the Parent and the Purchaser,
dated the Closing Date, substantially in the form and to the effect of Exhibit
-------
6.1.7 to this Agreement.
-----
6.2 Conditions to the Obligations of the Purchaser and the Parent. Each
-------------------------------------------------------------
of the obligations of the Purchaser and the Parent to be performed hereunder
shall be subject to the satisfaction (or the waiver by the Purchaser and the
Parent) at or prior to the Closing Date of each of the following conditions:
6.2.1 The representations and warranties contained of the
Seller Parties in this Agreement shall be true on and as of the Closing Date
(other than representations and warranties that speak as of a specified date).
6.2.2 The Sellers shall have performed and complied with all
agreements, obligations, covenants and conditions required by this Agreement to
be performed or complied with by them on or prior to the Closing.
6.2.3 No Litigation shall be threatened or pending against the
Sellers before any court or governmental agency that, in the reasonable opinion
of counsel for the Purchaser, could result in the restraint or prohibition of
any such party, or the obtaining of damages or other relief from such party, in
connection with this Agreement or the consummation of the transactions
contemplated by this Agreement.
6.2.4 The execution, performance, and delivery of this
Agreement by the Sellers shall have been duly authorized by the Board of
Directors of HSI, HSI General (for itself and as to HSI General for HSI
Properties), and Vincent (for itself and as to Vincent for SFL). The Purchaser
shall have received copies of all resolutions pertaining to such authorizations,
20
<PAGE>
certified by the corporate secretaries of HSI, HSI General, HSI Limited, and
Vincent, respectively.
6.2.5 The Seller Parties shall have delivered to the Purchaser
a certificate to the effect that each of the conditions specified in Sections
6.2.1 through 6.2.4 above is satisfied in all material respects.
6.2.6 The Sellers shall have provided to the Purchaser (a)
payoff letters for all Liens, encumbrances, and liabilities with respect to the
Assets (other than Permitted Liens) and shall have paid all amounts required to
be paid by the Sellers with respect to those Liens, encumbrances, and
liabilities; (b) evidence satisfactory to the Purchaser that all amounts owed by
or to the Sellers to or from any of the Seller Parties or any Affiliate of any
Seller Party, or any spouse, child or other relative of any such Affiliate, have
been repaid in full or will be repaid out of the Cash Payment on the Closing
Date; and (c) evidence satisfactory to the Purchaser that the Assets transferred
to the Purchaser at Closing include cash in an amount equal to the sum of (x)
the Prepaid Postage reasonably estimated by the Sellers for that date; and (y)
$500,000.
6.2.7 The Sellers shall have obtained the written consent of
the parties listed on Schedule 4.5 (the "Required Contract Consents") to the
------------
assignment of the General Contracts of such parties to the Purchaser.
6.2.8 The Sellers or Shaw, as applicable, shall have delivered
or caused to be delivered to the Purchaser and the Parent, as applicable, all of
the following agreements:
(A) the Non-solicitation Agreement;
(B) the Escrow Agreement;
(C) the Shaw Stock Option Agreement;
(D) the Employee Stock Option Agreements;
(E) the Lease Assignment; and
(F) the Bill of Sale and Assumption Agreement.
6.2.9 The Purchaser and the Parent shall have received the
opinion of Haynes and Boone, L.L.P., counsel to the Sellers, dated the Closing
Date, substantially in the form and to the effect of Exhibit 6.2.9 to this
-------------
Agreement.
21
<PAGE>
ARTICLE 7
CLOSING
7.1 Actions at Closing. At Closing, the Purchaser, the Parent, and the
------------------
Sellers shall take the following actions, in addition to such other actions as
may otherwise be required under this Agreement:
7.1.1 Copies of Consents. The Sellers shall deliver to the
------------------
Purchaser copies of all Required Contract Consents.
7.1.2 Deliveries of Documents. The Seller Parties shall
-----------------------
deliver to the Purchaser and the Parent, and the Purchaser and the Parent shall
deliver to the Seller Parties, such the documents and instruments referenced in
Section 6.1.7 and Section 6.2.8 and such additional instruments of conveyance
and transfer as the Purchaser may reasonably request to effect the transfer and
assignment to the Purchaser of the Assets.
7.2 Delivery of Purchase Price. The Purchaser shall deliver the Cash
--------------------------
Payment to the Sellers and the Escrow Cash to the Escrow Agent, which shall have
entered into the Escrow Agreement.
ARTICLE 8
COVENANTS OF THE PURCHASER, THE PARENT, AND THE SELLERS
8.1 Mutual Cooperation. Subject to the other provisions of this
------------------
Agreement, before, at, and after the Closing, without further consideration,
each of the parties to this Agreement shall use reasonable efforts in good faith
to procure or execute, acknowledge, and deliver all such further certificates,
conveyance instruments, consents, and other documents as the other parties or
their counsel may reasonably request (a) to vest in the Purchaser, and perfect
and protect the Purchaser's right, title, and interest in, and enjoyment of, the
Assets and the Business, (b) to effect the Purchaser's assumption, payment of
discharge of all Assumed Liabilities, and/or (c) to ensure more effectively the
compliance of each party with its agreements, covenants, warranties, and
representations under this Agreement. Specifically and without limitation, the
Purchaser and the Parent shall use their reasonable efforts to provide the
Sellers such assistance as they may reasonably request in connection with
matters relating to taxes. The Purchaser shall retain and provide the Sellers
with records or information which may be relevant to any such tax return, audit,
examination, proceeding, or determination, and the Purchaser shall retain all
such books and records for so long as necessary in keeping with applicable
statutes of limitations.
8.2 Covenants of the Sellers Regarding the Operation of the Business
----------------------------------------------------------------
from the Signing Date to the Closing Date. The Sellers hereby agree that from
-----------------------------------------
the Signing Date to the Closing Date they will continue to operate the Business
in the ordinary course of business. Without limiting the foregoing, the Sellers
will not permit or suffer any of the following to occur during such period,
unless the Sellers obtain the prior written consent of the Purchaser:
22
<PAGE>
8.2.1 (a) any increase in the salary, wages or other
compensation of, or any payment of severance benefits to, any employee of the
Seller Parties whose annual salary is, or after giving effect to such change
would be, $25,000 or more; (b) any establishment or modification of (A) targets,
goals, pools or similar provisions in respect of any fiscal year under any Plan
or any employment-related contract or other compensation arrangement with or for
such employees or (B) salary ranges, increase guidelines or similar provisions
in respect of any Plan or any employment-related contract or other compensation
arrangement with or for such employees; or (c) any adoption, entering into or
becoming bound by any Plan, employment-related contract or collective bargaining
agreement, or amendment, modification or termination (partial or complete) of
any Plan (other than pursuant to Section 8.10), employment-related contract or
collective bargaining agreement, except to the extent required by applicable
Law;
8.2.2 (a) incurrences by the Sellers of indebtedness with
respect to the conduct of the Business in an aggregate principal amount
exceeding $25,000 (net of any amounts discharged during such period), or (b) any
voluntary purchase, cancellation, prepayment or complete or partial discharge in
advance of a scheduled payment date with respect to, or waiver of any right of
either Seller under, any indebtedness of or owing to either Seller with respect
to the conduct of the Business (other than as contemplated in Section 4.7
above);
8.2.3 any physical damage, destruction or other casualty loss
(whether or not covered by insurance) affecting any of the plant, real or
personal property or equipment of the Sellers used or held for use in the
conduct of the Business in an aggregate amount exceeding $25,000;
8.2.4 any material change in (a) any pricing, investment,
accounting, financial reporting, inventory, credit, allowance or tax practice or
policy of the Business or (b) any method of calculating any bad debt,
contingency or other reserve of the Business for accounting, financial reporting
or tax purposes;
8.2.5 (a) any acquisition or disposition of any assets and
properties used or held for use in the conduct of the Business, other than
Inventory in the ordinary course of business consistent with past practice and
other acquisitions or dispositions not exceeding in either case $25,000 in the
aggregate; or (b) any creation or incurrence of a Lien (other than Permitted
Liens) on any assets and properties used or held in the conduct of the Business;
8.2.6 any entering into, amendment, modification, termination
(partial or complete) or granting of a waiver under or giving any consent with
respect to any General Contract, Lease, License Agreement or Insurance Policy
that is required (or had it been in effect on the date hereof would have been
required) to be disclosed under Section 1.1 above; other than in the ordinary
course of business;
23
<PAGE>
8.2.7 capital expenditures or commitments for additions to
property, plant or equipment used or held for use in the conduct of the Business
constituting capital assets in an aggregate amount exceeding $25,000;
8.2.8 any transaction with any Affiliate of the Sellers or
with any spouse, child or other relative of any such Affiliate (a) outside the
ordinary course of business consistent with past practice or (b) other than on
an arm's-length basis;
8.2.9 any entering into of a contract to do or engage in any
of the foregoing after the date hereof; or
8.2.10 any other transaction involving or development
affecting the Business or the Assets outside the ordinary course of business
consistent with past practice.
8.3 Post-Closing Settlement.
-----------------------
8.3.1 The books of the Business shall be closed as of the
Closing Date, and the Purchaser shall prepare, with the Sellers' assistance as
needed and appropriate, a schedule as of the Closing Date that will accurately
reflect the Adjusted Net Assets of the Sellers as of the Closing Date. The
Purchaser shall deliver this schedule to the Sellers no later than 30 days after
the Closing. The Sellers and the Purchaser shall seek in good faith to reach
agreement on the final form of such schedule not later than 15 days after
receiving it from the Purchaser. If the Purchaser and the Sellers fail to reach
agreement as contemplated in the previous sentence, either of them may commence
dispute resolution proceedings under Section 10.19.
8.3.2 When the schedule of Adjusted Net Assets is determined
as contemplated in Section 8.3.1, then the following shall occur, as applicable
(the "Post-Closing Settlement"):
(A) If the Adjusted Net Assets are equal to or greater than
$1,700,000, then the Purchaser shall pay the full amount of the Holdback to the
Sellers, with interest thereon calculated at an annual rate equal to the prime
rate as published in the Wall Street Journal.
(B) If the Adjusted Net Assets are less than $1,700,000 (the
"Minimum Adjusted Net Assets") but greater than $1,450,000 (the Minimum Adjusted
Net Assets minus the Holdback), then the Purchaser shall pay the Sellers an
amount equal to (x) the Holdback, minus (y) the amount by which the Adjusted Net
Assets are less than the Minimum Adjusted Net Assets, with interest on the
amount paid to the Sellers calculated at an annual rate equal to the prime rate
as published in the Wall Street Journal, and the Purchaser shall retain the
remaining amount of the Holdback.
(C) If the Adjusted Net Assets are less than $1,450,000 (the
Minimum Adjusted Net Assets minus the Holdback), then the Purchaser shall retain
the entire amount of the Holdback, and the Sellers shall pay the Purchaser an
amount equal to (x) the Minimum Adjusted Net Assets minus the Holdback, minus
(y) the Adjusted Net Assets.
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<PAGE>
8.4 Allocation of Purchase Price. The Purchase Price shall be allocated
----------------------------
as disclosed in Schedule 3.3, and all tax returns and reports filed by the
------------
Sellers, the Parent, and the Purchaser with respect to the transactions
contemplated by this Agreement shall be consistent with that allocation.
8.5 Maintenance of Books and Records. Each of the Sellers and the
--------------------------------
Purchaser shall preserve until the fifth anniversary of the Closing Date all
records possessed or to be possessed by such party relating to any of the
Assets, Assumed Liabilities, or Business of the Sellers before the Closing Date.
Such records may nevertheless be destroyed by a party if such party sends to the
other party written notice of its intent to destroy records, specifying with
particularity the contents of the records to be destroyed. Such records may then
be destroyed after the 30th day after such notice is given unless another party
objects to the destruction, in which case the party seeking to destroy the
records shall deliver such records to the objecting party.
8.6 UCC Matters. From and after the Closing Date, the Sellers will
-----------
promptly refer all inquiries with respect to ownership of the Assets or the
Business to the Purchaser. In addition, the Sellers will execute such documents,
assignments and financing statements as the Purchaser may request from time to
time to evidence transfer of the Assets to the Purchaser, including any
necessary assignments of financing statements, assignment of rights or other
similar documents.
8.7 Offers of Employment by the Parent to the Sellers' Employees. The
------------------------------------------------------------
Parent agrees that after the Closing (a) except as noted on Schedule 8.7, it
------------
will offer employment to all employees of the Sellers who meet the conditions of
employment generally required of all other employees of the Parent (the
"Transferred Employees") effective on the Closing Date; provided, however, that
any Transferred Employee who is not actively employed with a Seller on the
Closing Date because of a temporary leave of absence or short-term disability
shall be offered employment by the Parent effective as of the date such person
is able to return to active work, (b) subject to Section 8.8 and Section 8.9
with respect to enrollment in the Parent's Health Plans and Sellers' Health
Plans (as such terms are defined in Section 8.8), and the Transferred Employees
will be entitled to the standard benefits made available as of such date to the
Parent's other employees, (c) it shall treat prior service with a Seller as
service with the Parent for purposes of determining eligibility to participate,
vesting, benefit service, and matching or profit sharing contribution benefits,
if any, with respect to all employee benefit plans covering Transferred
Employees, and, to the extent legally permissible, shall amend all such employee
benefit plans to the extent necessary to do so, and (d) the Transferred
Employees will be given credit for years or months of service for purposes of
vacation and similar benefits offered by the Parent, provided that any
Transferred Employee who has accrued vacation hours as of the Closing Date must
use those vacation hours before January 1, 2002, when any accrued and unused
vacation hours shall expire.
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<PAGE>
8.8 Enrollment in Parent's Health Plan. Effective on or before January
----------------------------------
1, 2002, the Parent (a) shall make enrollment available to all Transferred
Employees and their eligible dependents, without any waiting period, proof of
insurability, or a physical examination, in the Parent's plan or plans providing
medical and dental benefits (the "Parent's Health Plan") to the extent such
individuals were enrolled in a Seller's medical and dental plan (the "Seller's
Health Plan"); (b) shall waive any restrictions or limitations for pre-existing
conditions for all Transferred Employees and their eligible dependents, to the
extent such restrictions did not apply under the Seller's Health Plan; and (c)
shall give credit to each Transferred Employee and their eligible dependents for
any deductibles, co-pay, and out of pocket expenses paid during the current year
of the Sellers' Health Plans by such Transferred Employee or dependent under the
Sellers' Health Plans. Such enrollment for the Transferred Employees and their
eligible dependents in the Parent's Health Plans shall be effective no later
than January 1, 2002.
8.9 Assumption by Parent of Sellers' Health Plan. Upon the Closing, the
--------------------------------------------
Parent shall assume the Sellers' Health Plan, provide coverage thereunder to the
Transferred Employees and their eligible dependents, and keep it in effect
without modification until the Parent's Health Plan is available to the
Transferred Employees as provided in Section 8.8.
8.10 Termination of Holmes & Shaw, Inc. 401(k) Plan. The Sellers shall
----------------------------------------------
cause the Holmes & Shaw, Inc. 401(k) Plan (the "Sellers' 401(k) Plan") to be
terminated on or before the Closing Date. Each Transferred Employee who receives
a distribution of such Transferred Employee's account balance from the Sellers'
401(k) Plan shall be entitled to rollover such distributed account balance
directly to the InterCept 401(k) Plan (the "Parent's 401(k) Plan"), provided
that the plan administrator of the Parent's 401(k) Plan receives reasonably
satisfactory evidence indicating that the Sellers' 401(k) Plan meets the
applicable qualification provisions of the Code. Subject to the preceding
sentence, the Parent shall take all legally permissible action, including the
adoption of any necessary amendment to the Parent's 401(k) Plan, to ensure that
the Parent's 401(k) Plan will accept such direct rollovers from the Sellers'
401(k) Plan.
8.12 Consents. The Sellers will use commercially reasonable efforts to
--------
acquire the Required Contract Consents and any other consents required to effect
the transactions contemplated by this Agreement, and the Purchaser and the
Parent shall cooperate with the Sellers in acquiring such consents. To the
extent that the rights of a Seller under any License Agreement, Intellectual
Property, Lease, General Contract or Authorization or other asset to be assigned
to the Purchaser hereunder may not be assigned without the consent of another
person which has not been obtained, this Agreement shall not constitute an
agreement to assign the same if an attempted assignment would constitute a
breach thereof or be unlawful. If any such consent shall not be obtained or if
any attempted assignment would be ineffective or would impair the Purchaser's
rights to the asset in question so that the Purchaser would not in effect
acquire the benefit of all such rights, the applicable Seller, to the maximum
extent permitted by law, shall act after the Closing as the Purchaser's agent to
obtain for the Purchaser the benefits thereunder and shall cooperate, to the
maximum extent permitted by
26
<PAGE>
law, with the Purchaser in any other reasonable arrangement designed to provide
such benefits to the Purchaser.
ARTICLE 9
INDEMNIFICATION
9.1 Indemnification by the Seller Parties. Each of the Seller Parties
-------------------------------------
shall indemnify, defend, and hold harmless the Purchaser, the Parent, and their
subsidiaries, successors and permitted assigns, and the directors, officers,
employees and agents of each (collectively, the "Purchaser Indemnitees"), at,
and at any time after, the Closing, from and against any and all demands,
claims, actions, or causes of action, assessments, losses, damages, liabilities,
costs, and expenses, including reasonable fees and expenses of counsel, other
expenses of investigation, handling, and litigation, and settlement amounts,
together with interest and penalties (collectively, a "Loss" or "Losses"),
asserted against, resulting to, imposed upon, or incurred by the Purchaser
Indemnitees, directly or indirectly, by reason of, resulting from, incident to
or arising in connection with any of the following:
9.1.1 Breach of Obligation. Any breach of any representation,
--------------------
warranty, or agreement of any of the Seller Parties contained in or made
pursuant to this Agreement and the other Purchase Documents, including the
agreements and other instruments contemplated by this Agreement and those
documents;
9.1.2 Excluded Liabilities. Any liabilities or obligations
--------------------
of any kind or nature whatsoever, whether accrued, absolute, contingent, or
otherwise, known or unknown, arising out of or in connection with any Excluded
Assets, or the conduct of the Business or the ownership or use of the Assets
before the Closing Date, except for the Assumed Liabilities; or
9.1.3 Violations of Fraudulent Conveyance or Bulk Sales Laws.
------------------------------------------------------
Any failure to comply with any fraudulent conveyance or similar Laws relating to
notices to creditors, or with any applicable bulk sales Laws.
9.2 Indemnification by the Purchaser and the Parent. Each of the
-----------------------------------------------
Purchaser and the Parent shall, jointly and severally, indemnify, defend, and
hold harmless the Sellers, each director, officer, employee and agent of the
Sellers, and their respective heirs, successors, and permitted assigns, Shaw,
Vincent, and HSI General (collectively, the "Seller Indemnitees"), at, and at
any time after, the Closing, from and against any and all Losses asserted
against, resulting to, imposed upon, or incurred by the Seller Indemnitees,
directly or indirectly, by reason of, resulting from, incident to or arising in
connection with any of the following:
9.2.1 Breach of Obligation. Any breach of any representation,
--------------------
warranty, or agreement of the Purchaser or the Parent contained in or made
pursuant to this Agreement or the other Purchase Documents, including the
agreements and other instruments contemplated by this Agreement and those
documents;
27
<PAGE>
9.2.2 Assumed Liabilities. Any of the Assumed Liabilities; and
-------------------
9.2.3 Post-Closing Operations. The ownership and operation of
-----------------------
the Assets and Business from and after the Closing Date.
9.3 Notice of Claim. The party entitled to indemnification under this
---------------
Agreement (the "Claimant") shall promptly deliver to the party liable for such
indemnification under this Agreement (the "Obligor") notice in writing (the
"Required Notice") of any claim for recovery under Section 9.1 or Section 9.2,
specifying in reasonable detail the nature of the Loss, and, if known, the
amount, or an estimate of the amount, of the liability arising therefrom (the
"Claim"). The Claimant shall provide to the Obligor as promptly as practicable
thereafter information and documentation reasonably requested by the Obligor to
support and verify the claim asserted, provided that, in so doing, it may
restrict or condition any disclosure in the interest of preserving privileges of
importance in any foreseeable litigation. If the Obligor notifies the Claimant
that it does not dispute the claim described in the Required Notice or fails to
notify the Claimant within 30 days after receiving the Required Notice that the
Obligor disputes the claim described in the Required Notice, as the case may be,
the Loss specified in the Required Notice will be conclusively deemed to have
been incurred by the Claimant. If the Obligor has timely disputed the claim
described in the Required Notice, the Obligor and the Claimant will proceed in
good faith to resolve the dispute under Section 10.19.
9.4 Defense. If the facts pertaining to the Loss arise out of the claim
-------
of any third party (other than a member of the Purchaser Indemnitees or the
Seller Indemnitees, whichever is entitled to indemnification for such matter)
and indemnification is available by virtue of the circumstances of the Loss, the
Obligor must assume the defense or the prosecution of that claim, including the
employment of counsel or accountants, at its cost and expense. If representation
of both the Obligor and the Claimant by such counsel would be inappropriate due
to actual or potential differing interests between the Obligor and the Claimant
in such proceeding (such as the availability of defenses to the Claimant), the
Claimant (together with all other indemnified parties which may be represented
without conflict by one counsel) shall have the right to retain one separate
counsel, with the reasonable fees and expenses to be paid by the Obligor. The
Claimant shall have the right to determine and adopt (or, in the case of a
proposal by the Obligor, to approve) a settlement of such matter in its
reasonable discretion, except that Claimant need not consent to any settlement
that (a) imposes any non-monetary obligation or (b) the Obligor does not agree
to pay in full. The Obligor shall not be liable for any settlement of any such
claim effected without its prior written consent, which shall not be
unreasonably withheld, delayed, or conditioned. Whether or not the Obligor
chooses to so defend or prosecute such claim, all the parties to this Agreement
shall cooperate in the defense or prosecution of that claim and shall furnish
such records, information, and testimony, and attend such conferences, discovery
proceedings, hearings, trials, and appeals, as may be reasonably requested in
connection with it.
28
<PAGE>
9.5 Limitations. Notwithstanding anything in this Article 9 to the
-----------
contrary:
9.5.1 Threshold; Maximum. No indemnification or any other
------------------
claim for damages under this Agreement or any other instrument or agreement to
be executed and delivered by the parties to this Agreement in connection with
the transactions contemplated by this Agreement shall be payable by any party to
any other party until (and then only to the extent that) the total of all Losses
equals or exceeds $100,000, in which event the Purchaser Indemnitees or Seller
Indemnitees, as the case may be, shall be entitled to claim indemnity for the
full amount of such aggregate Losses in excess of $100,000; provided, however,
that the foregoing limitations shall not apply to damages payable for Losses, if
any, arising out of a misrepresentation in Section 4.16.3, or to the Sellers'
obligation to pay the Purchaser under Section 8.3.2(C). In no event shall the
liability of either the Seller Indemnitees or the Purchaser Indemnitees under
this Article 9 exceed $5,000,000.
9.5.2 Time of Assertion. No indemnification shall be payable
-----------------
by any party with respect to matters as to which it has not received notice from
the Claimant within 18 months after the Closing Date, after which time, if no
Losses have been asserted against a party, then that party shall have no further
liability under this Agreement; provided, however, that there shall be no
limitation on the time during which indemnification may be sought or obtained
for (x) Losses based on a misrepresentation or breach of warranty in Section
4.2; or (y) any instance of fraud or any knowing and willful breach by any party
of any provision of this Agreement or any other instrument or agreement to be
executed and delivered by such party in connection with the transactions
contemplated by this Agreement. While the Escrow Agreement is in effect, the
indemnity set forth in this Article 9 shall be restricted to the Escrow.
9.6 Indemnification Exclusive Remedy. If the Closing occurs,
--------------------------------
indemnification pursuant to the provisions of this Article 9 shall be the sole
and exclusive remedy of the parties for any breach of any representation,
warranty, covenant, agreement, or other provision contained in this Agreement or
any other Purchase Document, except for: (a) claims based on fraud, (b)
non-monetary equitable relief, and (c) matters to be submitted to arbitration
under Section 8.3.1, this Article 9, and the Escrow Agreement.
9.7 Investigation; Survival of Representations, Warranties, Covenants
-----------------------------------------------------------------
and Agreements. Notwithstanding any right of the Purchaser (whether or not
--------------
exercised) to investigate the Business or any right of any party (whether or not
exercised) to investigate the accuracy of the representations and warranties of
the other party contained in this Agreement, the Seller Parties on one hand, and
the Purchaser and the Parent on the other hand, have the right to rely fully
upon the representations, warranties, covenants and agreements of the other
contained in this Agreement. The representations, warranties, covenants, and
agreements of the Seller Parties, the Purchaser, and the Parent contained in
this Agreement will survive the Closing:
(a) indefinitely with respect to the representations and
warranties contained in Sections 4.1, 4.2, 5.1, 5.2 and the covenants
and agreements contained in
29
<PAGE>
Sections 10.2 and 10.17, and
(b) for 18 months after the Closing Date in the case of all
other representations and warranties and any covenant or agreement.
ARTICLE 10
MISCELLANEOUS
10.1 Sales, Transfer, and Documentary Taxes, etc. The Sellers shall pay
-------------------------------------------
all federal, state and local sales, documentary and other transfer taxes, if
any, due as a result of the purchase, sale or transfer of the Assets in
accordance herewith whether imposed by law on the Sellers, the Purchaser, or the
Parent, and the Sellers shall indemnify, reimburse and hold harmless the
Purchaser and the Parent in respect of the liability for payment of or failure
to pay any such taxes or the filing of or failure to file any reports required
in connection therewith.
10.2 Expenses. Except as otherwise provided in this Agreement, each of
--------
the Purchaser and the Parent on one hand, and the Sellers on the other hand,
shall pay their own expenses incidental to the preparation of this Agreement,
the carrying out of the provisions of this Agreement and the consummation of the
transactions contemplated by this Agreement.
10.3 Contents of Agreement; Parties in Interest; etc. The Purchase
-----------------------------------------------
Documents set forth the entire understanding and agreement of the parties to
this Agreement with respect to the transactions contemplated by this Agreement.
This Agreement shall not be assigned, amended, or modified except by written
instrument duly executed by each of the parties to this Agreement. Any and all
prior or contemporaneous negotiations, agreements, representations, warranties,
and understandings between or among the parties regarding the subject matter
hereof, whether written or oral, are superseded in their entirety by this
Agreement and the other Purchase Documents and shall not create any liability on
the part of any party to this Agreement in favor of any other party (or
parties), except as otherwise expressly set forth in this Agreement and in the
other Purchase Documents.
10.4 Waiver. Any term or provision of this Agreement may be waived at
------
any time by the party entitled to the benefit of that term of provision by a
written instrument duly executed by such party.
10.5 Notices. Any notice, request, demand, waiver, consent, approval or
-------
other communication which is required or permitted under this Agreement shall be
in writing and shall be deemed given only if delivered personally or sent by
telecopier, air courier, telegram or by registered or certified mail, postage
prepaid, as follows:
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if to the Purchaser:
The InterCept Group, Inc.
3150 Holcomb Bridge Road, Suite 200
Norcross, Georgia 30071
Attention: John W. Collins, Chief Executive Officer
Fax: (770) 840-2521
With a copy to:
Charles D. Vaughn, Esq.
Nelson Mullins Riley & Scarborough, L.L.P.
First Union Plaza, Suite 1400
999 Peachtree Street, N.E.
Atlanta, Georgia 30309
(404) 817-6189
(404) 817-6150 (facsimile)
If to any Seller Party, to:
George V. Shaw, III
to his home address as shown on the records of the Purchaser
With a copy to:
George G. Young III, Esq.
Haynes and Boone, L.L.P.
1000 Louisiana Street
Suite 4300
Houston, Texas 77002-5012
(713) 547-2081
(713) 236-5699 (facsimile)
or to such other address as the addressee may have specified in a notice duly
given to the sender as provided in this Agreement. Such notice, request, demand,
waiver, consent, approval or other communication will be deemed to have been
given as of the date so delivered, transmitted by facsimile, telegraphed, or
mailed, as the case may be.
10.6 Georgia Law to Govern. THIS AGREEMENT SHALL BE GOVERNED BY AND
---------------------
INTERPRETED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF GEORGIA,
WITHOUT REGARD TO ITS CONFLICT OF LAW PRINCIPLES.
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10.7 No Benefit to Others. The representations, warranties, covenants,
--------------------
and agreements contained in this Agreement are for the sole benefit of the
parties to this Agreement and their respective heirs, executors, administrators,
legal representatives, successors, and assigns, and nothing contained in this
Agreement or the other Purchase Documents shall be construed as conferring any
rights on any other persons.
10.8 Headings, Gender and Certain Terms. All section headings contained
----------------------------------
in this Agreement are for convenience of reference only, do not form a part of
this Agreement and shall not affect in any way the meaning or interpretation of
this Agreement. Words used in this Agreement, regardless of the number and
gender specifically used, shall be deemed and construed to include any other
number, singular or plural, and any other gender, masculine, feminine, or
neuter, as the context requires. Any reference to a "person" in this Agreement
shall include an individual, firm, corporation, partnership, trust, governmental
authority or body, association, unincorporated organization or any other entity.
The "knowledge" of a person shall include the current actual awareness of such
person, such person's officers charged with the responsibility for the matters
qualified by the use of the term "knowledge" and such matters as would be
revealed by a review of such person's records. The term "including" shall be
deemed to mean "including, but not limited to."
10.9 Schedules and Exhibits. All exhibits and schedules referred to in
----------------------
this Agreement are incorporated in this Agreement by reference and are intended
to be and by this reference are specifically made a part of this Agreement.
10.10 Severability. The invalidity or unenforceability of any provision
------------
of this Agreement in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
10.11 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which when executed and delivered shall be deemed to be an
original and all of which counterparts taken together shall constitute but one
and the same instrument.
10.12 Assistance of Counsel. The Seller Parties on one hand, and the
---------------------
Purchaser and the Parent on the other hand, acknowledge that they have had the
assistance of counsel in negotiating and preparing the terms of this Agreement;
therefore, this Agreement shall be construed without regard to any presumption
or other rule requiring construction against the party causing the Agreement to
be drafted.
10.13 Time of the Essence. Time is of the essence of this Agreement.
-------------------
10.14 Actions and Proceedings. The Seller Parties consent to the
-----------------------
exclusive jurisdiction and venue of the courts of any county in the State of
Georgia and the United States District Court for any District of Georgia in any
action or judicial proceeding brought to enforce, construe or interpret this
Agreement or the other Purchase Documents. The Seller Parties agree that any
forum other than the State of Georgia is an inconvenient forum and that
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a suit (or non-compulsory counterclaim) brought by the Seller Parties against
the Purchaser, the Parent, or any member of the Purchaser Indemnitees in a court
of any state other than the State of Georgia should be forthwith dismissed or
transferred to a court located in the State of Georgia.
10.15 Execution by Facsimile. Any party may deliver an executed copy of
----------------------
this Agreement and any documents contemplated by this Agreement by facsimile
transmission to another party, and such delivery shall have the same force and
effect as any other delivery of a manually signed copy of this Agreement or of
such other documents.
10.16 Confidentiality.
---------------
10.16.1 The Seller Parties on one hand and the Purchaser and
the Parent on the other hand shall hold in confidence all Confidential
Information (as defined in Section 10.16.2) about the other and shall not make
any copies of, distribute, or use any such Confidential Information except as
necessary to prepare for the completion of the contemplated transactions. After
the Closing, neither the Seller Parties on one hand nor the Purchaser and the
Parent on the other hand shall make any unauthorized disclosure of Confidential
Information about the other. Each such party, upon the first request in writing
from the other, shall return to the other all Confidential Information in its
possession, without retaining any copies of it. Notwithstanding the foregoing,
any party may disclose Confidential Information to the extent disclosure is
mandated by the legal requirements of such party, the Nasdaq Stock Market, or
the SEC, as well as to professional advisors, directors and senior executives as
necessary. This Agreement may also be disclosed to third parties if reasonably
necessary to secure consents or approvals to consummate the contemplated
transactions. The parties will cooperate to draft a press release for the
announcement of this Agreement as soon as possible after the execution of this
Agreement by all parties.
10.16.2 As used in this Section 10.16, "Confidential
Information" means all information relating to the Business, the Purchaser's
business (current or future), any Affiliate of the Purchaser, which information
is reasonably regarded as confidential or being information not in the public
domain including, without limitation: all Inventions (as defined in this
Section); technical data; research and development information; business
records, information and notes; products; "know-how"; Trade Secrets (as defined
in this Section); engineering or other data; designs, specifications, processes
and formulae; manufacturing or planning procedures, techniques or information;
marketing plans, strategies and forecasts; business and product development
plans, strategies and forecasts; financial statements, budgets, prices, costs
and financial projections; accounting procedures or financial information; names
and details of consumers, customers, suppliers and agents; employee details.
"Trade Secrets" means any information of the Seller Parties, the Purchaser or an
Affiliate of any of them (including but not limited to technical or
non-technical data, a formula, a pattern, a compilation, a program, a device, a
method, a technique, a drawing, a process, financial data, financial plans,
product plans, or a list of actual or potential customers or suppliers) which
(x) derives economic value, actual or potential, from not being generally known
to, and not being readily ascertainable by proper means by, other persons who
can obtain economic value from its disclosure or use, and (y) is the subject of
efforts that are reasonable under the circumstances to maintain its secrecy.
"Invention" means any invention, drawing,
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design, model, contrivance, structure, specification, improvement, discovery,
creation, idea, concept, formula, process and other work or contribution however
developed, created, made discovered or conceived, and whether or not patented or
patentable (whether by renewal or otherwise), protected by copyright, or
otherwise protected or capable of protection by law anywhere.
10.17 No Public Announcements. Except as provided in Section 10.16.1,
-----------------------
without the prior written consent of the other parties, neither the Seller
Parties on one hand, nor the Purchaser and the parent on the other hand, shall
make any press release or other public disclosure, or make any statement to any
customer, supplier, employee, or other person with regard to the contemplated
transactions.
10.18 Termination. This Agreement may be terminated as follows:
-----------
(a) at any time by mutual written consent of the Purchaser,
the Parent, and the Seller Parties;
(b) by either the Purchaser and the Parent on one hand, or the
Seller Parties on the other hand, by giving written notice to the other
parties at any time before Closing if such other party has breached any
material representation, warranty, or covenant in this Agreement in any
material respect; or
(c) by either the Purchaser and the Parent on one hand, or the
Seller Parties on the other hand, for any reason after October 31, 2001
by giving written notice to the other party.
10.19 Resolution of Certain Disputes. The parties agree that any and
------------------------------
all claims, controversies, or disputes between them that arise under Section
8.3.1, Article 9, and the Escrow Agreement ("Special Claims") shall be addressed
by them solely and exclusively in the following manner:
10.19.1 First, the parties shall consider participating in a
confidential mediation, although they are not required to mediate any Special
Claims arising between them. If the parties agree to mediate a Special Claim,
but are unable to agree on the selection of the mediator, either party may
contact the American Arbitration Association (the "AAA"), which shall appoint a
mediator. The parties shall share all costs of the mediation equally. Unless the
parties otherwise agree in writing, the mediation shall be held in Atlanta,
Georgia. Both parties may be represented at the mediation by legal counsel, and
each party shall have present at the mediation one or more representatives who
have full authority to bind the party to any resolution or settlement that may
be mediated.
10.19.2 Second, if the Special Claim is not resolved at a
mediation or if no mediation is held, the Special Claim shall be conclusively
resolved through a binding arbitration conducted in accordance with the AAA's
Commercial Arbitration Rules. A final judgment upon the award that is rendered
by the arbitrators may be entered by any court with
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jurisdiction. Unless the parties agree in writing to a different site, the
arbitration hearing shall be held in Atlanta, Georgia, before a panel of three
independent arbitrators. The parties shall select all arbitrators for this
panel, which may include individuals who are not licensed attorneys. If within
30 days from the date that an arbitration proceeding is initiated, however, the
parties cannot reach agreement as to any of the arbitrators to serve on the
panel, the arbitrators who are needed to complete the panel shall be appointed
by the AAA under its applicable rules. The costs of the arbitrators and all of
the legal fees incurred as a result of the arbitration proceeding shall be
awarded to the prevailing party as determined by the arbitrators.
10.19.3 Third, in any arbitration proceeding that is initiated
as provided in this Section 10.19, the parties agree that: the substantive law
of Georgia shall govern their disputes and each party shall be permitted to
obtain all of the following discovery, at a minimum, before the final hearing is
held: (a) three depositions of fact witnesses, (b) depositions of all designated
expert witnesses, (c) one set of written discovery requests (one set each of
interrogatories, requests for production and requests for admission) and (c)
disclosure of the full identity all fact witnesses who have any personal
knowledge of facts relevant to their disputes. The parties intend to limit
discovery to the specific parameters set forth above unless they later agree in
writing to permit additional discovery or the panel determines that some
additional discovery is warranted.
10.19.4 Nothing contained in these dispute resolution
provisions shall preclude either of the parties from seeking injunctive relief
from a state or federal court located in Atlanta, Georgia for the sole purpose
of enforcing the terms of this Agreement or any other Purchase Document, or of
the specific duties, obligations or rights that are created by this Agreement or
any other Purchase Document.
[Signatures begin on next page]
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IN WITNESS WHEREOF, the parties to this Agreement have duly executed
this Asset Purchase Agreement on the date first written above:
The "Parent"
The InterCept Group, Inc., a Georgia
corporation
By: /s/ Scott R. Meyerhoff
-----------------------------------------
Scott R. Meyerhoff, Senior Vice President
and Chief Financial Officer
The "Purchaser"
InterCept Output Solutions, LP, a Texas
limited partnership
By: InterCept TX I, LLC, its
general partner, a Georgia
limited liability corporation
By: /s/ Scott R. Meyerhoff
--------------------------------
Name: Scott R. Meyerhoff
Title: Chief Financial Officer
The "Seller Parties"
HSI Holdings, Inc., a Nevada corporation
By: /s/ George V. Shaw, III
-----------------------------------------
Name: George V. Shaw, III
Title: President
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HSI Properties, Ltd., a Texas limited
partnership
By: Holmes & Shaw General, Inc., its
general partner, a Nevada
corporation
By: /s/ George V. Shaw, III
--------------------------------
Name: George V. Shaw, III
Title: President
/s/ George V. Shaw, III
--------------------------------------------
George V. Shaw, III, personally
Holmes & Shaw General, Inc., a Nevada
corporation
By: /s/ George V. Shaw, III
-----------------------------------------
Name: George V. Shaw, III
Title: President
Holmes & Shaw Limited, Inc., a Nevada
corporation
By: George V. Shaw, III
-----------------------------------------
Name: George V. Shaw, III
Title: President
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Superior Forms, Ltd., a Texas limited
partnership
By: Vincent Investment Company, Inc., its
general partner, a Texas corporation
By: /s/ George V. Shaw, III
---------------------------------
Name: George V. Shaw, III
Title: President
Vincent Investment Company, Inc., a Texas
corporation
By: /s/ George V. Shaw, III
-----------------------------------------
Name: George V. Shaw III
Title: President
38